Paycheck Chronicles

What To Do When Your Car Is A Mistake


Everyone makes mistakes, and everyone makes mistakes with money.  Sometimes it's something small, but sometimes it is a big mistake that is going to cost you money for years. In certain situations, a car purchase turns out to be a big mistake. Maybe the car itself is too expensive, or it is too pricey to insure, or it gets terrible gas mileage or requires expensive maintenance. Any which way, having a car you can't afford is a bad situation.

I know, I've been there.  When I was a super-smart 18 year old, I decided that I needed a new car.  With my non-existent credit history and small down payment, I took out a five year car loan.  After the shiny new car smell faded, I was faced with four plus more years of expensive (for me) car payments.  It was no fun.

Fortunately, you do have some choices.  You have three basic options: trying to make it into a better situation, selling the car and starting fresh, or just living with the mistake. There are pros and cons to each one. If you can't figure out what to do, utilize the services of your command's financial counselor or your base's family service center for a little guidance and perspective.

Improving the Situation

Is there anything you can change about your car and it's usage? Think creatively! Could you swap cars with your spouse so that the car with bad gas mileage is driven less, or so that the spouse with the better driving record is driving the expensive insurance car? If you're commuting a long distance, and can't get rid of the car, can you move closer to work?

If you can't actually lower the car's costs, can you increase your income so that the expenses aren't taking up such a large portion of your money? A holiday job, a yard sale, or a small business could provide funds to put towards vehicle expenses.

If you have a car loan, can you refinance into a lower interest rate? While I don't recommend refinancing a car loan to a longer term, maybe it is the right choice in this tough situation.

Selling The Car and Starting Fresh

This path can be the most painful and the most liberating at the same time.

It can be painful because you may owe more than the car is worth, or you may have contributed a significant down payment that you can't recoup. If you owe more than the car is worth, you may have to get a personal loan to cover the shortfall so that you can sell. Ouch! Now you're paying a loan for a car that you don't even have anymore. However, the payments on a $5,000 personal loan will be a lot more manageable than the payments on a $40,000 car loan.

On the other hand, selling the car may lessen the overall financial hit, puts a shorter timeframe on the recovery, and allows you to start moving forward.  For many people, a huge weight is lifted from their shoulders when they sell a car they can't afford.

Living With Your Mistake

In rare cases, the best option is to just deal with it.  If you can still pay all your bills, and you're going to lose a bundle by selling your car, you may just want to plod on and make a smarter choice next time.

Strategically deciding the best course of action will help you feel like you're doing something positive and hopefully mitigate the long-term damage.

Have you ever made a car buying mistake?  What did you do?

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